It turns out that I didn’t understand mining pools before, and I actually lost so much mining income?

As we all know, as long as you participate in virtual currency mining, you will definitely come into contact with mining pools, but most miners choose mining pools rashly, resulting in a lot of income being lost every year?

Today, let’s talk about the truth about mining pools.

1. What is a mining pool? What problems does it solve? What role does it play?

A network platform that packs computing power and centralizes mining.

As the number of mining devices on the BTC network increases and the computing power becomes stronger, the computing difficulty of the entire network is extremely high. The probability of a single device or a small number of devices obtaining block rewards in the BTC network is infinitely close to zero (if you have the latest s17+ Antminer mining alone, theoretically you can only mine a block every 32 years and get a reward of 12.5 BTC).

Therefore, there is a method of combining computing power for centralized mining, and then distributing block rewards according to the computing power possessed by each party. The website established by this method is called a mining pool.

Mining in a mining pool can be compared to a group fighting monsters in a game. After killing the monsters, the rewards are distributed by the team leader according to the contribution of each member. Therefore, currently BTC mining is basically carried out after the computing power is close to the mining pool.

Obviously, under the mining pool mechanism, the problem of unstable income for individual miners is solved. No matter how much computing power a miner has, as long as he participates in mining by joining the mining pool, he can get a small amount of BTC reward by contributing his computing power to the mining pool, regardless of whether he mines a valid block or not. Therefore, when multiple people cooperate in mining, the BTC reward obtained is also shared by multiple people according to their contribution.

The mining pool guarantees the basic profit rights of miners, allowing them to obtain the deserved profits stably and continuously from mining, and also enhances the overall stability and security of the BTC network.

2. What is the allocation model of the mining pool?

The distribution modes of mining pools are mainly divided into PPLNS, PPS, PPS+, FPPS and other modes. Before analyzing these modes, we must first clarify the income composition of each block. The income composition generally consists of two components, including the block reward of the block (the current Bitcoin block reward is 12.5 BTC) and the transaction fee. After understanding the income composition, you can have a deeper understanding of these distribution modes.

PPLNS (Pay Per Last N Share): Based on the ratio of the effective workload submitted by the mining machine to the difficulty of the entire network, the mining pool will deduct the mining fee from the total actual block reward of the mining pool and settle with the miners. Under this rate model, the miners' income is closely related to the actual number of blocks generated by the mining pool;

PPS (Pay Per Share): Based on the ratio of the effective workload submitted by the mining machine to the difficulty of the entire network, the mining pool will deduct the mining fee from the total theoretical block reward of the mining pool and settle with the miners. This rate model mining pool bears greater risks, but can guarantee stable income for miners. Even if the mining pool does not generate blocks for 24 hours, miners can still obtain corresponding income;

PPS+: This is a combination of the two rate modes of PPS and PPLNS, that is, the block rewards of the blocks are settled by PPS according to the theoretical number of blocks exploded by the mining pool, while the transaction fees are settled by PPLNS according to the miner's fees obtained from the actual blocks exploded by the mining pool.

FPPS: Full PPS, the theoretical block rewards of the mining pool and the theoretical transaction fees over the past period of time are settled according to PPS.

3. Next, let’s analyze how to choose a mining pool?

Choose a mining pool based on distribution model, security and stability, and handling fees

① At present, the mainstream mining pools basically adopt the pps+ and fpps modes. Based on the principle of the above distribution mode,

The distribution of pps+ income is related to the mining pool's luck value.

The revenue distribution of fpps is related to the mining fee of the entire network.

The author recommends that miners who seek stable returns choose

fpps mode, although the pps+ mode can be considered that over a long period of time, the actual number of blocks in the mining pool is equal to the theoretical number of blocks, and the average handling fee of the mining pool is the same as the average handling fee of the entire network, but for miners who pursue stability, it is not a desirable method to link part of the income to probability, so it is recommended to choose the relatively stable fpps mode.

Miners who are looking for a little excitement can choose the pps+ mode. After all, the transaction fee accounts for a small proportion of the income. If the mining pool has a high luck value, the income will be slightly higher than the average fee.

② A safe, stable and transparent mining pool will guarantee your reasonable income. The main thing to note is that your machine is switched to the mining pool.

Whether the computing power meets the standard and is stable, after eliminating the network, connection nodes and other reasons,

The security and stability of the mining pool can be judged by switching the same batch of machines to different mining pools and observing the computing power.

③Handling fee is the key for miners to choose mining pool, which will determine the final return of your mining machine investment.

Taking the current average computing power of new machines as 50T, if the computing power difficulty growth rate is set to 2%, 0.1526 BTC can be mined in a year.

For small miners (less than 50P), under the mainstream market fee of 4%, the actual income for each machine is 0.1464 BTC, and the mining pool fee for each mining machine is 0.0061 BTC per year. Taking the median fee of 500 new machines in one year, the annual fee is 3.05 BTC.

For medium-sized miners (50P~200P, i.e. 1,000 to 4,000 new machines), under the mainstream market fee of 2%, the actual profit per machine is 0.1495 BTC, the mining pool fee for each mining machine is 0.0031 BTC per year, and the median fee for 2,500 machines per year is 7.75 BTC.

For large miners (greater than 200P, i.e. more than 4,000 machines), under the mainstream market fee of 1%, the actual profit for each machine is 0.1511 BTC. The mining pool fee for each mining machine is 0.0015 BTC per year, and the fee for 10,000 new machines is 15 BTC per year.

Here I would like to remind all miners not to underestimate the mining pool’s handling fee, because it is deducted from the revenue every day, and it is recorded in BTC. It can be calculated that when BTC returns to the previous high of 20,000 US dollars or even higher,

How much fiat currency do you spend on mining pool fees in a year? That’s why I say the key to choosing a mining pool is the mining pool fees.

Next, I would like to give corresponding mining pool selection suggestions for large, medium and small miners.

Small miners should look for safe and stable mining pools with relatively low handling fees;

Medium-sized miners already have some bargaining chips in their hands. They should seek possible cooperation, such as joining forces with other medium-sized miners around them to negotiate with suitable mining pools, and strive to become shareholders of the mining pools. While enjoying preferential shareholder rates, they can also earn dividends from the handling fees of the entire mining pool.

Since large miners have a certain say in computing power, they should go a step further and consider the issue of their own mining farms while considering mining pools.

In this case, you should look for a mining pool company that can not only cooperate with you in the mining pool business, but also solve your own mining farm problems. It would be even better if you can become a shareholder of both the mining farm and the mining pool at the same time.

That’s all about my insights and thoughts on the mining pool. Welcome to follow the official account. If you have more questions, you can communicate with me in the background. I hope that the followers of the mining professor can avoid pitfalls and make more money in the mining process.